One analyst said the deal between Silgan Holdings and Graham Packaging creates an oligopoly in rigid plastics packaging, another sees it as a move away from commodity plastics.

One analyst said the deal between Silgan Holdings and Graham Packaging creates an oligopoly in rigid plastics packaging – where a slim number of companies now rule the North American kingdom.

Another said that it further emphasizes the move away from commodity plastics.  The April 13 deal bySilgan Holdingsto buyGraham Packaging Co.for about $4.1bn solidifies the new market approach in packaging – consolidate and conquer. Until now, Stamford, CT-based Silgan had focused primarily on metal food and closures – its plastics business only accounted for 17% of sales, almost all in personal care.

Graham, York, PA, has been a longtime leader in U.S. plastics packaging, however. The company made several recent shifts to gain market strength, renegotiating contracts with key customers and moving from a private to a publicly held firm. The deal needed the approval of Graham’s major owners –Blackstone Groupand the Graham family, which together own an estimated 65% of the company.

The deal is significant in other ways. Silgan president/ceo Anthony Allott proclaimed the new entity as the premier food and specialty beverage packaging company – working in both plastic and metal and with combined sales of about $6.24bn. The players both focus on specialty applications – it is notable that they companies will stay away from commodity water bottles in PET and focus on higher-margin categories. Graham also has notable technology coveted by Silgan.

The plastics space is changing.Amcor Rigid PlasticsboughtBall’s plastics operations last year to create another market behemoth. Now, it is up to the smaller U.S.-based players – including PlastipakandConsolidated Container– to consider their next moves.

Packaging Strategies’ Perspective: Some insiders whispered that Silgan could have gone either way – either selling off its plastics unit or going for broke for a large acquisition that would grow it. Obviously, the latter option became highly attractive when Graham became available.
 
 -Joe Pryweller, Editor/Conference Director, Packaging Strategies